Can one CEO really run three LAs?

1. Can one CEO really run three LAs? Stephen Giacchino Director, MITIE

2. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing add value? Lessons Learned MY BRIEF • Who are MITIE and what do they do? • Can one Chief Executive really run three LAs? • Can Shared Services offer the efficiencies needed? • Can outsourcing support innovation and create efficiencies? • What can we learn from the commercial sector?

3. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing help? Lessons Learned 63:37 Private : Public £1.9bn Revenue Facilities Management Property Management TOP 4UK FM service provider 23 years of growth Energy Services Asset Management 61,906+employees

4. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing help? Lessons Learned

5. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing add value? Lessons Learned MITIE Social Housing 12% of Group Revenue

6. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing add value? Lessons Learned YES 44 of the 50 largest HAs by stock ownership share a CE [Source: TSA, Regulatory and Statistical Return (RSR) for the year ended 31st March 2009] 9 Unitaries from 44 councils • And more seem to be on the way • It happens in HAs as well • In the private sector, it almost always happens post merger LGG, Shared Services Map http://local.gov.uk/lgv2/core/page.do?pageId=824307#contents-1 It is not new

7. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing add value? Lessons Learned • Can we really compare LAs to HAs and the private sector? Vision, Mission and Mandate Business Agenda Stakeholder Diversity Governance & Accountability Politics Private Sector Public Sector MORE Complex LESS Complex Districts Role of the CE Unitiaries / Shires Housing Associations BUT

8. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing add value? Lessons Learned Other Benefits • New career opportunities • Easier recruitment and retention • More investment opportunities • Scale for best-of-breed technologies • Providing service users with access to specialist staff YES “ …more than 200 projects either already up-and-running or under consideration, with some delivering savings to residents in excess of £3 million a year ”. [Source: LG Group Shared Services Project, March 2011]

9. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing add value? Lessons Learned Views of 101 Councils about sharing services with adjacent councils or other public bodies “..continuing with Total Place was ‘a no brainer’” David Parsons, Deputy Leader LGA ‘Total Place is very much on the agenda, rebadged in its new iteration… Joined up public services should not be a question, I want it to be the norm.’ Bob Neil, Local Government Minister, [Source: YouGovStone Survey, May 2011]

10. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing add value? Lessons Learned BUT Goal Alignment Service Objectives Identity Control Politics Private Sector Public Sector More EMOTIVE Less EMOTIVE Significant Challenges

11. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing add value? Lessons Learned • The question should be WHY… …shared services ? …have 1 CEO ?   To cut costs • To share R&D • To capitalise on brand • To focus on core competency • To grow services / products • To enter new markets Because you don’t need more than 1 • One Golden Rule (shareholder value) • Single Agenda (growth) • Homogenous stakeholder group • Transactional Leadership is vested elsewhere

12. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing add value? Lessons Learned • Total UK Turnover = £207bn p.a. • 60:40 private/public sector • Facilities & Property Management = £55.8bn p.a YES [Source: Oxford Economics, April 2011]

13. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing add value? Lessons Learned [Source: Oxford Economics, April 2011]

14. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing add value? Lessons Learned YES Survey of 101 Councils (May 2011) 84% believe outsourcing has been successful in achieving savings 58% believe outsourcing is critical to them achieving savings 70% - the expected increase in levels of outsourcing 63% believe that partnership is the most important factor in a public-private relationship [Source: YouGovStone Survey, May 2011]

15. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing add value? Lessons Learned 1980 1990 2000 2010 2015 In-house Single Service Bundled Services Managed Services Integrated FM Strategic Outsourcing Contribution to client’s strategic development External Investment Potential Added Value Cost Reduction Opportunities

16. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing add value? Lessons Learned 1980 1990 2000 2010 2015 In-house High High Strategic Outsourcing Integrated Services Single Service Bundled Services Managed Services Integrated FM Strategic Outsourcing Contribution to client’s strategic development External Investment Potential Managed Services Single Service Bundled Services Low Low Low High Cost Reduction Opportunities

17. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing add value? Lessons Learned Four Social Partners Separate, ‘greenfield’ legal entity Platform for community engagement Employee Ownership

18. MITIE Can 1 CE run 3 LAs? Can SS work? Can outsourcing add value? Lessons Learned • Restructuring cost base And not… • short-term gains It’s about… • Creating strategic opportunity • cost cutting • Strategic goal alignment • service scope similarity • Cultural fit • geographical proximity • Political will • political dictat • TRANSFORMATIONAL Leadership • TRANSACTIONAL Leadership

19. In Summary… There ISN’T a right or wrong answer BUT There IS a right question one CE? share services? outsourcing? WHY The evidence suggests you can have 1 CE, SS does work, and outsourcing adds value

20. Dr Stephen GiacchinoDirector, Strategy and Corporate DevelopmentMITIE Group PLC T: 0115 9407015E: stephen.giacchino@mitie.com Follow us on Twitter @MPM_Strategy